Two months ago, TikTok appeared to be on the verge of being absorbed into a new US-based company partly owned by Oracle and Walmart, a deal blessed by president Donald Trump. Now, the short video app owned by Chinese social media giant ByteDance is trying to buy time until president-elect Joe Biden takes over at the White House.
Yesterday, TikTok challenged the August executive order from the outgoing president for it to be sold, ideally to a “very American” company, on national security grounds within 90 days. That deadline falls tomorrow (Nov. 12). In a petition filed with a US court of appeals yesterday, the company and its Chinese parent ByteDance said they had sought numerous times to meet the terms of the order by proposing various deals to the US government. The latest proposal, made on Nov. 6, would form a new entity owned by Oracle, Walmart, and existing US investors in ByteDance to handle the app’s US user data and content moderation.
ByteDance and TikTok said they hadn’t heard back from the Committee on Foreign Investment in the United States (CFIUS), the interagency group reviewing the deal, on their request to extend the deadline while finalizing the deal, forcing them to challenge the entire order. The companies said the order violated their constitutional rights, and that it sought to use a three-year-old acquisition to wrest technology and assets developed by ByteDance for TikTok.
In a statement to the media, TikTok expressed frustration over its dealings with the current administration.
“In the nearly two months since the president gave his preliminary approval to our proposal to satisfy those concerns, we have offered detailed solutions to finalize that agreement—but have received no substantive feedback on our extensive data privacy and security framework,” said TikTok.
It’s unclear what could happen on the deadline, or what steps the court will take in response to the petition—it is rare for courts to overturn presidential orders. Other injunctions already temporarily protect TikTok from additional ban efforts by the administration.
The challenge is the latest plot twist in the TikTok saga, which saw Microsoft woo the company and then drop out of the process, and Beijing change its export rules to foil an outright sale. On Sept. 19, TikTok, Oracle and Walmart announced they had reached a deal to create a new US firm, TikTok Global, but the process stalled almost instantly amid contradicting narratives from the companies about whether the new entity would be Chinese or US-owned. The president’s coronavirus diagnosis, followed shortly by a national election also diverted attention from it.
An injunction against the executive order, for example, might end up working as a kind of lame-duck period for the deal, so that TikTok can restart the process of addressing US concerns under the Biden administration, which many Chinese tech companies hope will be more predictable to deal with than Trump’s techno-nationalist stance. Among other moves against Chinese tech firms, the Trump administration put telecom equipment giant Huawei on a trade blacklist, and lobbied allies not to use its parts, before turning its attention to TikTok.
TikTok and ByteDance have said they remain committed to negotiating a solution to US national security concerns with CFIUS, though it’s unclear how the plan to set up a US entity to house user data would be affected if the divestment order were vacated. As the next president, Biden also has the power to overturn or mitigate the previous president’s executive orders with his own orders if he wishes. TikTok and ByeDance didn’t immediately reply to questions from Quartz.
Still Chinese firms should not be overly optimistic about the outlook for them under the Biden administration, especially as little is known yet of his thinking on this topic.
“The petition from TikTok indicates the app’s hope that it could overthrow Trump’s executive order and maintains its current operations,” Shen Meng, a director at Beijing-based boutique investment bank Chanson & Co. told Quartz. “But even as Biden has a very different style compared with Trump, facing a highly polarized US society, neither Biden nor the Democrats would probably take a U-turn [on Chinese tech]. So we need to watch closely Biden’s policy direction to decide whether Chinese tech will fare better under him.”
Oracle didn’t immediately reply to questions. Walmart declined to comment.